The Federal Court – Why Seek Injunctions Anywhere Else?

Successful interlocutory injunctions in trade-mark proceedings before the Federal Court were once considered to be as rare as Sasquatch sightings. A substantial hurdle for moving parties requesting such relief has been demonstrating irreparable harm. However, the decision issued last week in Sleep Country Canada Inc. v Sears Canada Inc, 2017 FC 148 [Sleep Country] further signals the Federal Court’s readiness to conclude that certain harms are impossible to calculate and, therefore, qualify as irreparable.

Almost two years ago, Justice Brown released his decision in Reckitt Benckiser LLC v Jamieson Laboratories Ltd, 2015 FC 215 [Reckitt]. This decision was substantively upheld by the Federal Court of Appeal (2015 FCA 104). At the time, practitioners noted Reckitt’s potential impact on trade-mark plaintiffs’ ability to obtain interlocutory injunctions. For example, Alan Macek queried if the Court had endorsed the conclusion that irreparable harm is found where there is no methodology available to quantify the loss, while Daniel Davies stated “it is hoped that the decision is an indication of the Federal Court’s future willingness to grant pre-trial injunctive relief in appropriate IP cases.”

Justice Kane demonstrated this willingness in Sleep Country, a trade-mark dispute involving the slogans “why buy a mattress anywhere else?” and “there is no reason to buy a mattress anywhere else.” Before the Court was an interlocutory motion to enjoin Sears from using the latter slogan pending a final disposition at trial, since, in the view of Sleep Country, Sears infringed their trade-mark in the former slogan.

Following the well-established tripartite test for injunctions from RJR-MacDonald Inc v Canada, much of Sleep Country focused on whether or not any harms from Sears’ alleged trade-mark infringement could be quantified and, therefore, compensable by way of damages. The harms claimed by Sleep Country included lost sales, depreciation of goodwill, and loss of distinctiveness.

Justice Kane was unconvinced by Sears’ evidence and arguments on the issue of irreparable harm. In essence, the Court agreed with Sleep Country that damages due to the loss of distinctiveness of its slogan and the impact on its goodwill were not possible to quantify. In part, Kane J. relied on what she viewed as the general proposition from Reckitt, namely that “where there is loss of distinctiveness, the damage to goodwill is not possible to calculate” (at para 116).

Further, the Court rejected most of the assumptions and methodologies put forward by Sears’ experts to calculate Sleep Country’s potential lost sales. As Kane J. explained, her task in Sleep Country was to draw a line “between determining that it is possible to quantify the harm to Sleep Country arising from Sears’ use of the alleged infringing slogan […] and determining that it is impossible, or difficult to the point of impossibility, to quantify the harm” (at para 152; see also para 135).

Again, this follows the logic from Reckitt and the conclusion that irreparable harm will be made out where there is no methodology to quantify losses. Therefore, absent a reliable method to calculate the harm at issue, Kane J. agreed with Sleep Country that lost profits could not be calculated and, therefore, constituted irreparable harm.

Given the Court’s comments in Reckitt and Sleep Country, responding parties to interlocutory injunction motions relating to trade-marks should ensure that any expert evidence regarding the quantification of damages and lost profits is based on reliable methodologies that can be explained in a comprehensible manner to the courts.